NEW YORK (REUTERS) - The Dow shot up more than 200 points, scoring its best day since Jan 2, and the S&P 500 ended a two-week losing streak on Friday after United States (US) jobs data eased investors' worries that the Federal Reserve may be reducing its stimulus programme in the near future.
All three major US stock indexes rose more than 1 per cent for the day, extending gains toward the session's end, with the S&P consumer discretionary index and other growth sectors leading the way higher. The S&P 500 and the Nasdaq posted their best daily percentage gains since April 16.
Microsoft, up 2 per cent at US$35.67 (S$44.52), was among stocks giving the biggest lift to both the S&P 500 and the Nasdaq.
Stocks have rallied for most of the year. But the market began to lose ground following Fed Chairman Ben Bernanke's comments on May 22 that the central bank may decide to ease back on its bond-buying programmes in the next few policy meetings if data shows the economy is showing improvement. Last Friday, the S&P 500 marked two consecutive weeks of losses for the first time this year.
"The market earlier this week traded off precipitously, believing the Fed was close to stopping. Today's numbers make it pretty clear the Fed can't stop or even start tapering in September like they'd like to, so ironically the stock market is up," said Mr Brian Amidei, managing director of HighTower Advisors in Palm Desert, California.
The Labor Department's data showed job gains of 175,000 in May, slightly above the economists' forecast, while the US unemployment rate increased to 7.6 per cent last month from 7.5 per cent in April.
The Dow Jones industrial average surged 207.50 points, or 1.38 per cent, to close at 15,248.12. The Standard & Poor's 500 Index advanced 20.82 points, or 1.28 per cent, to 1,643.38. The Nasdaq Composite Index climbed 45.16 points, or 1.32 per cent, to end at 3,469.22.
For the week, the Dow gained 0.9 per cent, the S&P 500 rose 0.8 per cent, and the Nasdaq added 0.4 per cent.
The US job market has remained one of the economy's weakest areas since the recent downturn. The Fed, in turn, has linked its monetary policy to improvement in the country's job market. Economists say job gains of at least 200,000 per month over several months are needed to significantly reduce high unemployment.
The market's recent volatility suggests investors are starting to price in the eventual end of Fed stimulus, analysts said, raising concerns about how well stocks will fare without it.
The stock market's rally this year has largely been driven by the Fed's continued bond purchases.
The Dow is up 16.4 per cent for 2013, while the S&P 500 is up 15.2 per cent and the Nasdaq is up 14.9 per cent.
"I think you will see volatility pick up because there is more uncertainty as to which way the economy is going to turn," Mr Amidei said, noting that investors have already begun to sell stocks to lock in profits in some industries and sectors.
High dividend-yielding shares, which led this year's rally, have been among the weakest performers over the last two weeks.
On Friday, Wal-Mart Stores Inc shares rose 0.9 per cent to US$76.33 and helped lift the Dow after the world's largest retailer said its board had approved a new US$15 billion stock-repurchase programme, the first in two years.
Volume was roughly 6.4 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, in line with the average daily closing volume of about 6.4 billion this year.
Advancers outpaced decliners on the NYSE by a ratio of about 7 to 3, while on the Nasdaq, nearly two stocks rose for every one that fell.